How to Avoid a Geriatric Surprise Bill

March 21st, 2017 No comments

Erin Arvedlund of Phillynews.com recently wrote an article alerting consumers about health care providers and “bed hold” charges. We believe that many persons are unaware as to what a “bed hold” charge is and can potentially incur significant unexpected charges.

What is a “bed hold” charge? An example would be when a resident at an assisted-living facility has a mishap and is transferred to a hospital for medical treatment. The assisted-living facility can charge its residents Read more…

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Taxpayer Not Entitled to Unsubstantiated Employee Business Expenses and Hit With 20% Understatement of Tax Penalty

March 15th, 2017 No comments

In the U.S. Tax Court case of Chaudry, T.C. Summary Opinion 2015-74, (Dec. 21, 2015), an individual’s claimed unreimbursed employee business expenses were disallowed when audited by the IRS. In addition the taxpayer had to pay the accuracy-related penalty.

Mr. Chaudry had claimed employee expenses of $9,100 and $16,111, respectively, for tax years 2010 and 2011 on his Schedule A. These expenses included business expenses for uniforms, reference books, respiratory equipment, clinical scrubs, professional clothes, seminars, education, laundry, cell phone, parking, tolls, transportation and other miscellaneous expenses. At trial, Read more…

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6.5 Million Individuals in U.S.A. Are Age 112 or Older. Really?

March 7th, 2017 No comments

We think it relevant to remind individuals to periodically check on their Social Security earnings and future benefits. The Social Security Administration (SSA) provides an online service which we discussed in our December 2, 2014 and March 12, 2013 blog postings.

The SSA Office of the Inspector General issued an audit report showing that there are 6.5 million SS numbers who are age 112 or older that do not have a death entry. Are Americans living longer, or are the SSN’s records in error? Ironically, the Gerontology Research Group reported Read more…

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Starting Your Own Business?

February 28th, 2017 No comments

In our book “Empower Your Business to Reach Its Full Potential, Your Road Map to Planning and Executing a Successful Business”, we discuss the challenges and pitfalls entrepreneurs face when they attempt to start their own business without consulting with experienced professionals.

Those who believe that they can read a few articles on the Internet and become proficient enough to decide for themselves what type of business entity to choose are being penny wise/dollar foolish. Choosing the wrong entity can be very costly in terms of tax dollars, cash outlays, and time. Heck, we have even seen Read more…

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Is S Corporation Required to Pay Shareholder/Employee a Salary?

February 21st, 2017 No comments

Generally when an S Corporation has a shareholder/employee who owns at least two percent of the stock of the S Corporation, the S Corporation is required to pay that employee (and related parties) a reasonable salary. A reasonable salary is based on the facts and circumstances of the company, such as the number and types of services provided by this employee (such as personal services), services provided by other employees, how active the employee is, the number of hours worked, how other employees are compensated, and the profitability of the company to name just a few considerations.

There is one situation where the company is not required to W2 compensate this type of employee. If the shareholder/employee Read more…

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Age-Weighted Profit Sharing Plan

February 14th, 2017 No comments

Business owners value their employees and want to reward them for their contributions to the business. One way of doing so is to provide a retirement plan for their employees.

As a business owner, they have more at risk than their employees in the success of the business. When designing a retirement plan, an age-weighted profit sharing plan may be attractive to the business owner.

First, what is a profit-sharing plan? A profit-sharing plan is Read more…

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COLI-The ABCs of Company-Owned Life Insurance

February 7th, 2017 No comments

“Officer’s life insurance premiums” are not allowed as a deduction on a corporation’s tax returns. Why is this? Is this one of those unfair tax rules?

Well, when a corporation takes out a life insurance policy on one if its key employees — and the corporation is both the owner and beneficiary of the policy — the proceeds paid to the corporation upon the death of the employee are generally tax-exempt (I.R.C. §101). Because I.R.C. §101 serves to exclude life insurance proceeds from income, I.R.C. §264 prevents a second tax benefit by disallowing a deduction for any premiums paid on a policy on which the payor is the beneficiary. That way, the taxpayer doesn’t get a deduction for premiums AND tax-exempt proceeds when the policy is paid out.

The rules regarding COLI are complex. Did you know Read more…

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Learn Why a Consultant Was Denied Auto and Legal Deductions by IRS

January 31st, 2017 No comments

If you ever asked yourself why your tax professional provides you with a tax organizer and requires certain documentation from you to prepare your income tax returns, the case of G.F. Roy  (TC Summary Opinion 2016-77) provides a good glimpse of the importance of having the proper documentation to substantiate tax deductions.

A consultant was denied Schedule C deductions by the IRS for car and truck, depreciation and legal service expenses related to his business. In addition, he was found liable for an accuracy-related penalty. Why? He failed Read more…

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Contractor Denied Travel Expenses

January 24th, 2017 No comments

An independent contractor’s legitmiate travel costs were found by the IRS to be nondeductible commuting costs and not work-related, resulting in his self-prepared returns being very expensive.

The contractor lived in New Jersey and renovated properties in Philadelphia and the surrounding metropolitan area. He typically worked at the job site for several months. When the job was completed, he moved on to another jobsite. The taxpayer claimed deductions for transportation costs between his residence and the jobsites, including truck expenses, tolls, and insurance. The IRS disallowed the deductions, determining that they were nondeductible commuting expenses. The IRS found that the contractor was working within the metropolitan area and that he had no regular place of business.

The taxpayer decided to take his case to Tax Court. Unfortunately for the taxpayer, the Tax Court upheld the IRS’s denial of these expenses. Whereas the IRS does allow a taxpayer to deduct travel costs between the taxpayer’s residence and a temporary work location outside the metropolitan area where the taxpayer lives and normally works, Read more…

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How to Claim Charitable Deductions Without Itemizing Tax Deductions

January 17th, 2017 No comments

Since 2006, individuals age 70 ½ or older have had the opportunity to direct up to $100,000 of required minimum distributions (RMDs) from their IRAs to the charities of their choice. Unfortunately, this rule is not widely known. First, the $100,000 amount sounds as if this provision is only for the rich. That is not the case as explained below. Second, this is one of those tax rules that expired each year and Congress resurrected late in the tax year or the year following making it retroactive. Tax planning works all so much better when the tax laws are known before the tax year expires. The good news is that this tax provision has now been made permanent.

Let’s look at a very common scenario. Read more…

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